What is the difference between FOB and CIF shipping terms?
FOB and CIF divide cost and risk differently, and the point where risk transfers is not where most first-time buyers assume it is.
FOB: Free On Board
Under FOB the seller delivers the goods onto the vessel at the named port of shipment and clears them for export. From that point the buyer bears cost and risk, arranging and paying for ocean freight, insurance and everything at destination.
FOB gives the buyer control over carrier selection, routing and freight negotiation, which is valuable if you ship enough volume to hold rates of your own.
CIF: Cost, Insurance and Freight
Under CIF the seller arranges and pays for carriage to the named destination port and provides minimum insurance cover. The buyer takes over at the destination port for clearance, duty and inland delivery.
CIF is simpler for a buyer without freight arrangements, since one party handles the movement, and the price quoted covers goods and transport together.
The point most buyers get wrong
Under CIF, risk transfers when the goods are loaded onto the vessel, not when they arrive. The seller pays for freight and insurance to destination, but if the cargo is damaged or lost in transit, the loss is the buyer's to claim on the policy.
That surprises people, and it is the single most important thing to understand about the term. Paying for carriage and bearing risk during carriage are separate questions under CIF, and they sit with different parties.
Check the insurance cover you are actually getting
CIF requires only minimum cover, which is narrower than most buyers assume and may not respond to the losses they are worried about. If the cargo warrants it, either specify a higher level of cover in the contract or arrange your own policy rather than relying on the default.
Which to choose
Buyers with volume, a forwarder relationship and negotiated rates are generally better off on FOB, controlling the carrier and often beating the seller's freight cost. Buyers without those, or shipping infrequently, may find CIF simpler and no more expensive. Sellers usually prefer FOB for simplicity, since their obligation ends at the ship's rail.
Whichever you use, state the Incoterms version in the contract and name the port precisely. Ambiguity about which port or which edition applies is a common source of dispute.
We advise on Incoterms selection and handle freight, insurance and clearance under whichever structure serves your position best.